INDEX-DIGEST

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ACCOUNTING METHODS

See COMPENSATION.

ADDITIONS TO TAX

See also BAD DEBTS;

PARTNERSHIPS; SELF.

EMPLOYMENT TAX; UNITED STATES TAX COURT.

Late Filing Addition-Interest on Substantial Underpayment
Attributable to Tax-Motivated Transaction—Commissioner's Mo-
tion To Dismiss for Lack of Jurisdiction.-Where, after petitioners
had agreed to and paid underlying deficiencies, Commissioner
issued deficiency notices in which he determined late filing
additions to tax under sec. 6651(a)(1) for petitioners' taxable years
1977-79 and increased rate of interest under sec. 6621(c) for
1977-82, and petitioners timely filed petitions for redetermination,
Court granted Commissioner's motion to dismiss for lack of
jurisdiction as to issue of sec. 6621(c) increased interest, since sec.
6651(a)(1) late filing additions to tax were not deficiencies which
were substantial underpayments attributable to tax-motivated
transactions under sec. 6621(c)(4). White v. Commissioner, 95 T.C.
209, followed. Odend'hal v. Commissioner

...

Late Filing-Illness Not an Excuse From Negligence Additions—
Understatement Addition Applies to Delinquent Returns.—Where
H and W had filed no income tax returns for 1977-83; within 5
weeks after contact by IRS in 1984, H and W filed returns and
paid taxes and sec. 6651 additions; and H died in 1986 before
filing of petition, Court determined (1) neither H's declining health
nor self-assessment of sec. 6651 additions precluded imposition of
negligence additions, since H had maintained active accounting
and tax practice and secs. 6653 and 6651 can overlap; (2) sec. 6661
addition applies where delinquent return is filed after IRS contact,
since amount of tax on filed returns is "additional" to zero amount
prior to contact; and (3) sec. 6661 higher rate of 25% of

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671

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ADDITIONS TO TAX-Continued

underpayment applies and is not unconstitutional, since amended
section does not create new addition and clearly applies to
additions assessed after enactment date. Estate of McClanahan v.
Commissioner....

AMORTIZATION

Cable Television Franchise-De Facto Monopoly-Valuation of
Goodwill.-Where petitioner telecommunications company pur-
chased cable television systems which it operated in de facto
monopolistic environment granted by governmental body and
without bona fide competition, and petitioner amortized amount
attributable to franchise cost under sec. 1253(d)(2), Court deter-
mined, for petitioner's 1978 taxable year, cable television franchise
was "franchise" for purposes of sec. 1253(b), and, for purposes of
establishing amortization amount after deducting tangible assets
and going concern value, value of cable television franchise did not
include any separate and distinct goodwill asset. Pasadena City
Lines, Inc. V. Commissioner, 23 T.C. 34, followed. Tele-
Communications, Inc. v. Commissioner

BAD DEBTS

Corporation Advances-Capital Contributions-Bona Fides.-
Where in 1976-80 petitioner corporation X advanced cash, materi-
als, and services to subsidiary Y for Y's continuing working
capital, treating advances as accounts receivable; no formal loan
agreements or notes payable were executed, no interest was
charged or paid, and no due date was set for repayments; on Dec.
31, 1980, Y's president bought all outstanding shares of Y from X
in exchange for X's execution of general release discharging Y
from any intercompany liabilities owed to X; and, on its 1980
income tax return, X reported sec. 166 bad debt deduction in
amount of former receivable due from Y, Court determined, on
facts and circumstances, petitioner's advances were capital contri-
butions, not bona fide loans giving rise to debts to which sec. 166
could apply. Calumet Industries, Inc. v. Commissioner .....

Son's Debt to Bank Guaranteed by Father-No Consideration
for Guarantee-Additions to Tax.-Where petitioner, retired
farmer, leased his land to his son, who farmed it; in fall 1984,
petitioner paid $141,000 to bank pursuant to guarantee he had
executed covering his son's farming indebtedness, although son
had given no cash or property as consideration for guarantee; and
petitioner claimed short-term capital loss deduction on his 1984
income tax return on account of worthlessness of his son's debt,
Court determined petitioner was not entitled to sec. 166(d)(1)(B)
nonbusiness bad debt deduction, since (1) reg. 1.166-9(e) required
members of taxpayer's family or household listed under sec. 152 to
give cash or property as consideration for guarantee and (2) loss
was not incurred in petitioner's trade or business or transaction

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495

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